Fair Value Measurements

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, not adjusted for transaction costs. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

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The three levels are described below:

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Level 1 Inputs

—

Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by the Company;

Level 2 Inputs

—

Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 Inputs

—

Unobservable inputs for the asset or liability including significant assumptions of the Company and other market participants.

The following tables present assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. There have been no changes in the methodologies used at September 30, 2018 and December 31, 2017.

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﻿Fair Value Measurements at September 30, 2018

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Total

Level 1

Level 2

Level 3

﻿Assets:

﻿ Corporate Bonds

$

7,974,010

$

-

$

7,974,010

$

-

﻿

﻿Liabilities:

﻿ Warrant Liabilities

$

4,101,504

$

-

$

-

$

4,101,504

﻿

﻿

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﻿Fair Value Measurements at December 31, 2017

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Total

Level 1

Level 2

Level 3

﻿Assets:

﻿ Commercial Paper

3,238,500

-

3,238,500

-

﻿ Corporate Bonds

14,693,441

-

14,693,441

-

﻿Total Assets:

$

17,931,941

$

-

$

17,931,941

$

-

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﻿Liabilities:

﻿ Warrant Liabilities

$

7,853,635

$

-

$

-

$

7,853,635

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The fair value of the Company’s Level 2 marketable securities is determined by using quoted prices from independent pricing services that use market data for comparable securities in active or inactive markets. A variety of data inputs, including benchmark yields, interest rates, known historical trades and broker dealer quotes are used with pricing models to determine the quoted prices.

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The fair value methodology for the warrant liabilities is disclosed in Note 12.

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The carrying amounts reported in the financial statements for cash and cash equivalents (Level 1), and accounts payable and accrued expenses approximate fair value because of the short-term maturity of these financial instruments.

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The following table sets forth a reconciliation of changes for the nine months ended September 30, 2018 and 2017 in the fair value of the liabilities classified as Level 3 in the fair value hierarchy:

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Warrant Liabilities

﻿Balance at January 1, 2018

$

7,853,635

﻿Additions

-

﻿Unrealized gains, net

(3,752,131)

﻿Transfers out of level 3

-

﻿Balance at September 30, 2018

$

4,101,504

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Warrant Liabilities

﻿Balance at January 1, 2017

$

1,573,366

﻿Additions

4,107,488

﻿Unrealized losses, net

9,047,831

﻿Transfers out of level 3

(8,052,594)

﻿Balance at September 30, 2017

$

6,676,091

Additions consist of the fair value of warrant liabilities upon issuance. Transfers out of Level 3 for warrant liabilities consist of warrant exercises, where the liability is converted to additional paid-in capital upon exercise. The Company’s policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstance that caused the transfer.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.